C-5 DNA methylation is an essential mechanism controlling gene expression and developmental programs in a variety of organisms. Though the role of DNA methylation has been intensively studied in mammals and Arabidopsis, little is known about the evolution of this mechanism. The chromomethylase (CMT) methyltransferase family is unique to plants and was found to be involved in DNA methylation in Arabidopsis, maize and tobacco. The moss Physcomitrella patens, a model for early terrestrial plants, harbors a single homolog of the CMT protein family designated as PpCMT. Our phylogenetic analysis suggested that the CMT family is unique to embryophytes and its earliest known member PpCMT belongs to the CMT3 subfamily. Thus, P. patens may serve as a model to study the ancient functions of the CMT3 family. We have generated a ΔPpcmt deletion mutant which demonstrated that PpCMT is essential for P. patens protonema and gametophore development and is involved in CHG methylation as demonstrated at four distinct genomic loci. PpCMT protein accumulation pattern correlated with proliferating cells and was sub-localized to the nucleus as predicted from its function. Taken together, our results suggested that CHG DNA methylation mediated by CMT has been employed early in land plant evolution to control developmental programs during both the vegetative and reproductive haploid phases along the plant life cycle.